Explanation:

The difference between the funds' returns and the index return are:
Year 1: 5% - 4.5% = 0.5%
Year 2: 7% - 6% = 1%
Year 3: -2.5% - (-1.5%) = -1.0%
Year 4: 1% - 0.5% = 0.5%

\sqrt{\frac{(0.5)^2 + (1.0)^2 + (-1.0)^2 + (0.5)^2}{4}} = \sqrt{\frac{2.5}{4}} = 0.79

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Q.5043 The following are returns for a fund and the index it is tracking. Given the information below, the tracking error is closest to?

Period Fund Return Index Return
Year 1 5% 4.5%
Year 2 7% 6%
Year 3 -2.5% -1.5%
Year 4 1% 0.5%

Period	Fund Return	Index Return
Year 1	5%	4.5%
Year 2	7%	6%
Year 3	-2.5%	-1.5%
Year 4	1%	0.5%

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Last updated: July 21, 2026 at 02:10

0.68

0.79

0.62

0.59

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Q.5043 The following are returns for a fund and the index it is tracking. Given the information below, the tracking error is closest to? | Period | Fund Return | Index Return | |--------|-------------|--------------| | Year 1 | 5% | 4.5% | | Year 2 | 7% | 6% | | Year 3 | -2.5% | -1.5% | | Year 4 | 1% | 0.5% | | Financial Risk Manager Part 1 Quiz - LeetQuiz

Financial Risk Manager Part 1

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Q.5043 The following are returns for a fund and the index it is tracking. Given the information below, the tracking error is closest to? PeriodFund ReturnIndex ReturnYear 15%4.5%Year 27%6%Year 3-2.5%-1.5%Year 41%0.5%

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Q.5043 The following are returns for a fund and the index it is tracking. Given the information below, the tracking error is closest to?

Period Fund Return Index Return
Year 1 5% 4.5%
Year 2 7% 6%
Year 3 -2.5% -1.5%
Year 4 1% 0.5%